A Review of the size and cost of executive options scheme in Australia - empirical evidence and some Policy Considerations

A substantial literature devoted to the use and impact of executive options schemes now exists. This literature has provided important insights into matters such as the frequency with which business enterprises employ options as an integral element of their compensation frameworks, the scale of options plans in use and the incentive and governance consequences of the employment of options as a component of executive remuneration. However, a majority of this literature has focused on the United States, and consequently comparatively little is known about the dimensions and impact of executives options plans in other advanced economies. This paper addresses part of that gap by providing an overview of the executive options plans adopted by a sample of top 100 Australian Stock Exchange (ASX - 100) listed companies between 1997 and 2004. In particular, this paper provides details of the number of organisations within the ASX 100 which used executive options in each year of the sample period, the magnitude of the options plans put in place, the degree to which options issued pursuant to these plans were concentrated into the hands of a small set of executives and estimates of the impact these schemes would have had on before tax earnings had a requirement that the cost of options be expensed existed during the period under review.12 page(s